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oils which are either sold for use as a lubricant or are suitable for use as a lubricant. The tax applies unless

(i) the sale is exempt from tax under 11-202; or

(ii) the oil has been determined by the Commissioner of Internal Revenue to be "seldom used as a lubricant" and is sold for a nonlubricating use; or

(iii) the oil is sold as cutting oil under the procedure described in (c) below.

(b) “Seldom Used as a Lubricant." The following oils have been determined by the Commissioner of Internal Revenue to be "seldom used as a lubricant❞ and, thus, may be sold tax free: castor oil, petroleum white oil of certain specifications, crude neatsfoot oil, transformer or insulating oil, and a certain product used as an additive to the fuel used in internal combustion engines.

(c) Cutting Oils. Oil sold as cutting oil is not subject to the tax if the manufacturer or producer follows one of three procedures. First, lubricating oils may be sold tax free by the manufacturer or producer as cutting oil in any case where: (i) the manufacturer or producer packages the oil in containers of 5 gallons or less furnished by him and labeled by him to indicate use of the oil only in cutting and machining operations on metals; (ii) any advertising of the oil so packaged and labeled indicates that the oil is for use only in cutting and machining operations on metals; and (iii) the oil so packaged and labeled is sold by the manufacturer or producer to a purchaser for such use by him or for resale by him for such use.

Second, where the Commissioner of Internal Revenue has determined oil to be suitable for use as a lubricant only in cutting and machining operations on metals, the oil may be sold tax free by the manufacturer or producer as cutting oils, unless the manufacturer has definite knowledge, prior to or at the time of the sale, that the oil is not being purchased for use, or resale for use, in cutting and machining operations on metals. Oils as to which the Commissioner has made such a determination may be sold tax free whether in bulk or otherwise. However, the Commissioner may require that the oil be specifically represented to the purchaser, whether by labeling or otherwise, as being suitable for use only in cutting and machining operations on metals. Third, lubricating oils which are sold for use, or for resale for use in cutting and machining operations on metals, but which may not be sold tax free under one of the procedures described above, may be sold tax free, provided the manufacturer obtains from the purchaser a properly executed cutting oil certificate. The form set forth in 11-501.3 shall be utilized for this purpose.

(d) Refunds. The ultimate purchaser of lubricating oil (other than cutting oils, imported lubricating oils, or rerefined oil) is entitled to a refund of 6 cents per gallon on oil purchased tax paid which is used otherwise than as a lubricant in a highway motor vehicle. However, activities of the Department of Defense will not apply for such refunds.

11-102.5 Fishing Equipment. A tax of 10 percent is imposed upon fishing equipment (including parts or accessories sold therewith) sold by a manufacturer, producer, or imported.

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11-102.6 Firearms, Shells, and Cartridges.

(a) A tax is imposed at the rate of 10 percent upon pistols and revolvers; and at the rate of 11 percent on other firearms, shells, and cartridges sold by a manufacturer, producer, or importer. The tax does not attach when such articles are purchased with funds appropriated for the Military Departments.

(b) Chapter 53A of the Internal Revenue Code imposes a transfer tax and a tax on the manufacturer of machine guns and certain other firearms. Transfer to, or manufacture for, the United States is specifically exempted.

(c) Clearly identified orders or contracts of a Military Department, signed by an authorized officer of such Department, will be accepted in support of the exemption. In the absence of such orders or contracts, a statement signed by an authorized officer of a Military Department that the firearms, shells, or cartridges were purchased with funds appropriated for the Military Departments will be acceptable.

11-103 Excise Taxes on Facilities and Services. Chapter 33 of the Internal Revenue Code imposes excise taxes on communications and certain transportation of persons by air. In general, the tax is based upon the amount paid for the service and is imposed upon the person paying for the service.

11–104 Use Tax on Highway Motor Vehicles.

(a) A tax of $3.00 a year for each 1,000 pounds of taxable gross weight, or fraction thereof, is imposed upon the use of any highway motor vehicle which, together with semitrailers and trailers customarily used in connection with a vehicle of this type, has a taxable gross weight in excess of 26,000 pounds. The full tax is due for any vehicle which is used on the public highways of the United States at any time during the month of July, irrespective whether the vehicle is later removed from highway use. If the first use of a taxable vehicle occurs after the end of July, the tax is computed proportionately from the first day of the month in which the vehicle is first used, through the end of the following June. For example, if a vehicle is placed in use during August, 11/ 12 of the total tax is payable. No tax applies to vehicles, even though of a highway type, which are never used on the public highways during the taxable year.

(b) Taxable gross weight is the sum of—

(i) the actual unloaded weight of the vehicle and any semitrailers and trailers customarily used with such a vehicle, all units fully equipped for service; and

(ii) the weight of the maximum load customarily carried by all units of a

vehicle of this type.

(c) The tax is payable by the person in whose name the vehicle is, or is required to be, registered under the law of any State, or if owned by the United States, by the agency or instrumentality of the United States operating such vehicle. If a tax has been paid for a particular vehicle, no further liability can be incurred in the same taxable year, even though there is a change of ownership of the vehicle.

(d) The Secretary of the Treasury, however, has authorized an exemption for vehicles used by the United States whether or not they are Government owned.

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Part 2-Exemptions From Federal Excise Taxes

11-200 Policy. It is the policy of the Department of Defense to take maximum advantage of all exemptions from Federal excise taxes available to the United States and its contractors and to claim all refunds and credits which may be available to the United States and its contractors, except as otherwise provided in Part 1 and Part 2.

11-201 Retailers Excise Taxes. No retailers excise tax is imposed:

(i) on the sale of special fuels for the exclusive use of any State, any
political subdivision thereof, or the District of Columbia, or with
respect to the use thereof by any of the foregoing;

(ii) on the sale of special fuels for export or for shipment to a possession
of the United States (which for the purpose of this exemption in-
cludes Puerto Rico), and in due course so exported or shipped-
(A) This exemption shall be utilized by purchasing on a tax-exclusive
basis and furnishing the required proof of exportation or ship-
ment to a possession if:

(1) the purchase is substantial, and

(2) exportation or shipment to a possession is intended to follow not more than six months after title passes to the Government.

(B) To qualify for the exemption of sales for export or for shipment
to a possession:

(1) the supplies must be identified as having been sold by the
manufacturer (if the tax is a manufacturers excise tax) or
the retailer (if the tax is a retailers excise tax) for export or
shipment to a possession. The words “for export or shipment
to a possession" incorporated into or stamped on a contract
or purchase order are acceptable to the Internal Revenue
Service as evidence that the sale is for export or for ship-
ment to a possession. In solicitations and contracts, the
terms of which imply that the supplies will be either ex-
ported or shipped to a possession (e.g., delivery to a port of
embarkation or special packing requirements for overseas
shipment) where the purchase is not substantial and it is
therefore desired to purchase on a Federal excise tax-inclu-
sive basis, the solicitations and the contract should clearly
state that proof of export certificates will not be issued.
(2) the supplies must be exported or shipped to a possession in
due course. Proof of export or shipment will be furnished to
the contractor in the form set forth in 11-501.

(iii) on the sale of special fuels to retailers for resale (Sales by the United
States, or any agency or instrumentality thereof, are not exempt un-
less specifically made exempt by statute.);

(iv) on the sale of special motor fuels for use or used in the propulsion of vessels of war or military aircraft of the type enumerated in 11-202(iv);

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(v) on the sale of special fuels to a nonprofit educational organization for its exclusive use, or, with respect to the use thereof by a nonprofit educational organization.

11-202 Manufacturers Excise Taxes. No manufacturers excise tax is imposed: (i) on the sale of any article for use by the purchaser for further manufacture or for resale to a second purchaser for use by such second purchaser in further manufacture (An article shall be treated as sold for use in further manufacture if sold for use by the purchaser as material in the manufacture or production of, or as a component part of, another taxable article to be manufactured or produced. In the case of truck or bus parts and accessories, it is not necessary that the produced article be a taxable article. This exemption does not apply to tires or inner tubes.); or

(ii) on the sale of any article for export, or for shipment to a possession
of the United States which for the purpose of this exemption includes
Puerto Rico). This exemption shall be obtained only when the
purchase is substantial and exportation or shipment to a possession is
intended to follow not more than six months after title passes. For
proper utilization of this exemption, see 11-201 (ii).
(iii) on the sale of any article for resale to a second purchaser for export.
If articles upon which a manufacturers excise tax has been paid are
resold by a dealer for export, or for shipment to a possession, the
manufacturer is entitled to a credit or refund of the tax paid. If it is
economically advantageous to do so, this credit or refund shall be
utilized by purchase from a dealer on a tax exclusive basis and ex-
ecution of the required exemption certificate set forth in 11-501.1.
(iv) on sales of supplies for use as fuel supplies, ships' stores, sea stores,
or legitimate equipment on vessels of war of the United States or of
any foreign nation, including aircraft owned by the United States or
by any foreign nation and constituting a part of the armed forces
thereof, and guided missiles and pilotless aircraft owned or chartered
by the United States. This exemption and the exemption from the
retailers excise tax on special motor fuels (see 11–201(iv)) shall be
utilized by purchasing on a tax-exclusive basis and furnishing the
required exemption certificate (see 11-501.2) only if:
(A) the purchase is substantial,

(B) the contracting officer determines at the time of the purchase
that the supplies are intended for use in vessels of war or milita-
ry
aircraft, and

(C) the administrative burden of insuring that the supplies are used
for exempt purposes does not make use of the exemption
uneconomical. Administrative difficulties normally will not exist
if the particular supply is suited exclusively for use in vessels or
aircraft.

If supplies upon which a manufacturers excise tax has been paid are sold by a dealer for any of the exempt uses enumerated above, the manufacturer is entitled to a credit or refund of the tax paid. If it is

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economically advantageous to do so, this credit or refund shall be utilized by purchase from a dealer on a tax-exclusive basis and execution of the required exemption certificate set forth in 11-501.2. (v) on the sale of any article for the exclusive use of a State or local government; and

(vi) on the sale of any article to a nonprofit educational organization for

its exclusive use.

11-203 Supplies and Services for the Exclusive Use of the United States. By virtue of action taken by the Secretary of the Treasury, pursuant to Section 4293 of the Internal Revenue Code, exemption is available and shall be obtained, to the extent indicated, from the Federal excise tax on communication services and facilities furnished directly to the United States (as distinguished from being furnished to a Government contractor) and paid for directly by the Government. Such exemption is obtained without any exemption certificate.